Miner’s green push to help skip fuel woes rocking firms
One of Australia’s largest iron ore producers is accelerating plans to phase out fossil fuels as geopolitical tensions continue to drive up oil prices.
Fortescue Metals Group, controlled by Andrew ‘Twiggy’ Orman, expects to save $US100 million ($A141 million) in fossil fuel costs by 2027.
The Perth-based company’s latest move comes as a lobby group warns more than 80 per cent of Australian businesses face higher operating costs due to the global fuel crisis.
The crisis started with the US attack on Iran on February 28, and the price of Brent crude oil rose from $60 at the beginning of the year to $119.50 per barrel.
Even if oil supply issues ease, the price of crude oil is unlikely to return to US$60 anytime soon; Most market economists point to a price around US$80 in the coming months.
“Businesses are vulnerable to the conflict and will remain on edge until there is a permanent end to it,” Andrew McKellar, president of the Australian Chamber of Commerce and Industry, said on Friday.
“Even if hostilities cease, disruptions in oil supplies will have permanent consequences in many sectors.”
Fortescue is building what it describes as the world’s first industrial and fully integrated green energy grid, eliminating the need for diesel and fossil fuels.
It announced Friday that the system will power all of its operations without fossil fuels in 24-hour periods by the end of 2027, ahead of its previous 2030 target.
Fortescue expects the Pilbara green grid to be completed by the end of 2028.
“As global energy supply chains become increasingly unstable and the enormous risks of fossil fuel dependence emerge, Fortescue… proves that the industry can power itself,” he said.
Fortescue is seeking a mix of green energy solutions, including wind, solar and battery infrastructure.
The Australian chamber’s survey of nearly 2300 respondents from March 24 to April 2 shows other businesses are at the mercy of fuel prices that increase freight and shipping costs.
It was revealed that 61 percent had absorbed the increased fuel costs following the outbreak of the war, which has been going on for almost six weeks in the Middle East, rather than passing them on to consumers.
As a result, 44 percent experienced cash flow problems and a similar number faced reduced consumer spending
As profit margins shrank, 55 percent of respondents said they had reduced their core expenses, and almost a third had suspended investment or expansion plans.
World stock markets continue to decline, with most stock indexes, including Australia’s S&P/ASX200 index, down as much as 8 percent from record levels about a month ago.
“While a pullback or even a brief bear market is widely expected, the extent of this appears to depend on how quickly supply chains can normalise,” said David Robertson, chief economist at Bendigo Bank.
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